Startup 121: Lessons for the Recession from Rice Krispies
The past few months have been, how shall I say, pretty crappy and have caused lots of cut backs for most startups (and companies of every size). Mostly, this has meant laying people off, cutting expenses, and generally “battening down the hatches to weather the storm”.
I randomly had several conversations with people on the topic of what a startup (or any organization) should do in times like these and some basic things came up each time:
- Measure to manage
- Mix it up
- Take calculated risks
Measure to Manage
Today, months into this recession, no one would argue that the economic outlook is negative. However, often times forecasting is challenging to say the least and usually only accurate in hindsight. I used to joke with our Board whenever I presented a financial plan that the only thing I could guarantee was that we would miss the numbers. That did not mean the results would be worse, but that I was positive we would not hit the plan to the penny. We would be roughly right, which in the words of Kenyes, is better than precisely wrong.
By Darren Hester
It turns that we were in good company as the record for long term forecasting of macro economic indicators by the “experts” is actually only roughly right in the near term and not so predictive in the long term. Just like a startup’s financial plan.
The Federal Reserve released a paper at the very beginning of the recession (coincidence? conspiracy? hmmm…), which analyzed historical accuracy of past economic forecasts such as the Gross Domestic Product (GDP see wikipedia).
OK, I admit, it’s little nerdy thinking that others would be interested in Average Root Mean Squared Forecast Errors but…
The report basically shows that most forecasts of growth are only good one or two quarters out, and beyond that, “…uncertainty about the economic outlook is considerable.” So if it’s hard to forecast a problem, what should a startup do?
In today’s world, measuring things is actually easier than it has ever been – Page views, Click Throughs, Conversion Rates, Leads, Registrations, Trials, you name it. Startups are actually pretty good at using data and all should have a set of good metrics to manage their business (See previous post If you don’t know where you are doing, well you’re lost).
In a startup this is usually easier than for big companies, but on a business by business basis, this should be possible even in the largest of companies but is something most don’t do well or at all. And it’s another reason why startups kick corporate booty. Let’s face it, startups are, well, smarter.
Now, all that being said, metrics need to be leading indicators for what will likely happen in the future as opposed to only lagging indicators. At Vontu, since we were doing enterprise sales (i.e. 9 months average time from a first prospect meeting to closing a 6 or 7 figure deal), even after having some of our best quarterly sales results, which is a lagging indicator, we were worried about the future because leading indicators, such as product evaluations (or as we called them, risk assessments), were not tracking to our historical averages. Team attrition is another example of a lagging indicator of a problem, that is to say if people are leaving, the problem already exists.
Now it sounds like I am talking out of both sides of mouth. And I am. Even though the Fed is not good with long term forecasting, having 6 months of visibility is still better than none. To know you have a problem (or an opportunity as the case may be), one can not focus enough on leading indicator metrics. And if you did not have the right metrics in place at the start of this recession, consider putting them in place now as you will also be a step ahead in predicting when to accelerate investment as things improve.
Mix It Up
Most startups (and large companies) made big people changes over the past 6-9 months typically in the form of cost cutting and layoffs and sometimes quite significant layoffs both in numbers and percentages. While layoffs are big changes affecting the lives of many people yet help in improving the health of the company for the short term, they are not about dramatic changes in leadership for the long term.
In my opinion, down turns are as good a time as any to make dramatic people decision that you have either been dreading or avoiding for whatever reason. First, there is already so much disruption that throwing some more into the mix won’t make much of a difference. Secondly, it is somewhat easier to hire great people given the macro-economic turmoil and increased unemployment. And lastly, everyone on the team already knows who is not performing. You as a manager and leader are usually the last to acknowledge the problem, yet the team expects you to make these tough calls.
Expectations for business results are low today so take the time to make the big people changes and if things get a little messy in the short term, but it’s all relative to the ongoing mess which already exists. And who knows, they may actually be better too.
Take Calculated Risk
My friend Phil forwarded me the New Yorker article “Hanging Tough” by James Surowiecki about what strategy some companies followed during the Great Depression. An example used two competitive cereal makers, Post and Kellog, and how chose very different market responses. Post did the standard cost cutting, yet Kellogg invested in advertising and new products and as a result, “Snap, Crackle, Pop!”, Kellogg became the dominant player it is today. For the same reasons it is a good time to start a company today (less competition, easier to hire, leverage the inevitable economic upswing), companies should be thinking about investments to be made today as the economy is at its lowest point.
In general, if one keeps an eye on the long term, one should always be making investments. Unfortunately, as the New Yorker article suggests, uncertainty overtakes risk taking. This short term uncertainty causes people to focus on what they can control, e.g. costs, as opposed to making smart investments for the future.
Yet history has shown that even during the Great Depression, companies that made good investments did well. Even the stock market came back more quickly than people remember.
At a recent presentation by Professor Jeremy Siegel from Wharton, he had a slide which stated, “On average, for the seven largest gaps [in performance relative to trends] over the past 145 years, the market has rallied 24% in the following year, 21.4% per year over the next 3 years, and 18.4% per year over the next five years.”
As suggested in the New Yorker, while most people are “battening down the hatches”, you might want to invest as the others might actually just might miss the boat.
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Econ 120: What Taxes and Splitting the Restaurant Bill Have in Common
Since it’s tax day and all, I figured why not post something that I am sure will spur lots of conversation (or maybe controversy?)
There are so many (mis?)perceptions on the tax system, I decided to get some facts about how it all works, or at least, to see what of the rhetoric is true. In particular, in most of the press and political speak out there, the common perception is:
- Tax cuts only benefit the “rich”
- The “rich” actually pay fewer taxes
Darren Hester
Now, without commenting on what the tax system should look like I figured it would be interesting to share a funny story to help explain why people perceive the first point and then share some data from the Congressional Budget Office on whether the the top income earners actually pay fewer taxes. (By the way, I am a first generation American and the son of Italian immigrants. My grandfather came through Ellis Island when he was 16. In other words, I come from very humble beginnings and I figure that might help in any emotional responses this post might trigger.)
Splitting the dinner tab
The following is a story about if we split the dinner tab like we split the tax burden and helps explain the misconception that tax cuts only benefit the wealthy. This parable has floated around the internet in various forms and no one is sure of its true origin though some trace it back to Don Dodson and a letter to the Chicago Tribune. Anyway, the story goes like this.
Suppose that every day ten men go to a restaurant for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes (Editorial: this is not exactly how we pay taxes as you will see below, but its generally indicative of how it works), the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve.
0 + 0 + 0 + 0 + 1 + 3 + 7 + 12 + 18 + 59 = 100 cost of dinner
“Since you’re all such good customers, he said, I’m going to reduce the cost of your daily meal by $20.” Now dinner for the 10 only costs $80.
The first four are unaffected; they still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody’s share, then the fifth man and the sixth man would end up being paid to eat their meal.
The restaurant owner proceeded to work out the amounts each should pay under the same assumptions: Now the fifth man also paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, and the ninth paid $12 leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings. “I only got a dollar out the $20,” complained the sixth man, pointing to the tenth, “and he got 7!”
0 + 0 + 0 + 0 + 0 + 2 + 5 + 9 + 12 + 52 = 80 reduced cost of dinner
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got seven times more than me!”
0 + 0 + 0 + 0 + (-1) + (-1) + (-2) + (-3) + (-6) + (-7)= (-20) savings on dinner
“That’s true,” shouted the seventh man. “Why should he get $7 back when I got only $2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor.”
And that is why there is a perception that tax cuts benefit the highest income earners versus the lowest quintile. It’s because the percentages are already progressive, that is that the highest income earners pay a greater share of tax as well as a greater percentage of their income.
Just the facts
I am sure some of you are saying, “that’s not true” or quoting Warren Buffet who said something to the effect that his tax rate is lower than that of his secretary. Now I don’t know about Warren’s tax rates, but I figured a few charts would at least get the facts out there.
All the following data is from the Congressional Budget office using the latest tax year made available which is 2006. The data goes back to 1979 for folks that are interested. Links to everything are at the bottom of the post.
To start, I wondered what is the effective tax rate for various income levels. Do the rich pay a lower tax rate as Warren Buffet suggests?
The first chart is the Effective Tax Rate for all federal taxes paid (Income, Social Insurance (Social Security, Medicare, et al), Corporate Income Tax, and Excise Taxes. The second chart is just income taxes.
Effective Federal Tax Rates (2006). Source: Congressional Budget Office
Effective Federal Income Tax Rates. Source: Congressional Budget Office
I think the data shows pretty clearly, that contrary to common perception, the top income earners pay a greater percentage of their income. That is to say, the tax system is quite progressive both in total taxes and even more so with respect to income. Approximately, 40% of households pay no taxes on their income or actually receive additional money above their income.
The second question I wondered is on a dollar for dollar comparison, how do different income levels pay as a percentage of their total income. This graph is a comparison of total income earned compared to total taxes paid.
Share of Total Before Tax Income and Total Federal Tax Liabilities (2006). Source: Congressional Budget Office
This too shows how the highest quintile pay a higher share of the total tax liabilities in comparison to their income. Again, the system is progressive.
So what?
Of course the more interesting question for discussion is if this is the best and right way for taxes to work. Without tackling that question today, one other fact to share. Prior to the 16th Amendment being passed in 1916, it was unconstitutional to apportion direct taxes in any way other except equally based on the census. So is it right? Is it the best system? I will leave that for a future post but hopefully we can all start using the real facts versus common misconceptions.
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Source for chart data: Congressional Budget Office
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Dear Mr. President, Two Wrongs Are Still Two Wrongs
Dear President Obama,
I can only imagine how busy you are these days, so let me be get to the point.
With all due respect, two wrongs will not make a right.
By responding to AIG’s bonus fiasco with exorbitant (extortionist?) tax rates on the bonuses of employees at banks with TARP money, a second wrong will most certainly only cause more harm to our very fragile financial system. In addition, it sets a precedent of using the tax system to punitively target minority groups of our country with excessive tax rates which is a very dangerous step for the government to take.
We all agree that the situation at AIG is a mess. Any company that needs a $170 billion government bailout is certainly a mess. And without knowing the facts, it is completely understandable why paying out bonuses of more than $165 million would ignite populist rage. (Whether any of those bonuses are deserved or needed is another question, but let’s put that aside for now).
However, the current taxation proposal is simply an emotional, populist driven reaction that will cause more problems than good. One of the lessons learned from the Great Depression is that populist driven, over-reactions such as the Smoot-Hawley act, which kicked off a global protectionist tariff war, severely worsened the length and depth of the economic meltdown.
The time is now to put aside emotion, ignore political polls, and to rise above party loyalties and partisan politics.
The time is now for you to Lead this Great Nation with integrity, respect and reason.
I strongly encourage you to immediately call for a stop to this legislative process for taxing certain employees of the banking industry and declare you will Veto the proposed legislation.
Yes, this “90% taxing of bonuses” might make some people feel better, but mob “justice” is never just and in this case it will only cause more harm and here are some of the reasons why:
1. AIG is the mess so deal with AIG.
AIG needs more oversight and governance. This administration should take some additional steps to put in place industry standard norms of governance for an investor with 80% ownership. These inlude:
- Appointing a set of board members, both industry executives and bureaucrats, to represent the taxpayers/shareholders interests as would any investor with 80% ownership in a company.
- Assigning at least one of the government appointed board members to the compensation committee.
- Setting requirements that certain expenses over a threshold (say the magical “$250,000″?) require board approval.
These are some basic rules of good corporate governance that even a start-up follows and I am more than happy to suggest additional ones if anyone is interested.
2. We need the best and brightest working hard to help drive growth in our economy.
We as a nation have prospered by unleashing the creative spirits of the best and brightest. And for that work, they should be paid a wage not set by the government but by the market itself. If we limit one’s ability to receive the value for their work because they are employed at US banks that have received TARP money, then it will lead to an exodus of the best and brightest from the places we need them most. We need them working day in and day out to help turn this economy around. And in the just announced Public-Private Investment Program to deal with the illiquid and “toxic” mortgage related assets, a key goal is to enlist the financial sector in helping to solve the problem.
3. It will lead to increased de-stabilization
Based on the resulting brain drain, banks will likely move aggressively to return all the TARP money they have received. While ultimately returning the money is what needs to happen, in some cases this will probably be done prematurely which will very likely lead to further de-stabilization. This will occur for two reasons. First, the banking system will simply be under capitalized. Secondly, those banks that return the TARP money will appear as better banks and could potentially lead to a run on the rest of the banks which do not return the TARP money. This will only serve to undo the improvements that are just now starting to take hold.
4. Lastly, this is simply an attack on the very foundation of our Great Nation.
One of our founding fathers, James Madison, is quoted as saying about taxation “…a national revenue must be obtained; but the system must be such a one, that, while it secures the object of revenue it shall not be oppressive to our constituents.”
The fact is that most of the employees at US Banks that have received TARP funding are good, hard working Americans that had nothing to do with the decisions at the banks that led to the issues we have today. It’s simply wrong to target all of them with exorbitant tax rates. It is wrong for a majority of any type – gender, race, creed, sexual orientation, or economic standing – to abuse the rule of law to oppress or limit the ability of a minority to achieve their full potential. It is a populist, anger driven attack on the basic foundation of our country’s principles of life, liberty, the sanctity of property and the pursuit of happiness.
As you stated in your inauguration speech:
We remain a young nation, but in the words of scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness
The time is now for you to Lead. I truly do HOPE you are able to not only “proclaim”, as you did in your inauguration speech, but to bring about the CHANGE which results in “an end to the petty grievances and false promises, the recriminations and worn-out dogmas, that for far too long have strangled our politics.”
Sincerely,
Joseph Ansanelli
www.ansanelli.com
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What if Steve Jobs was GM’s CEO?
In the continuing General Motors saga, Thomas Friedman, author of The World Is Flat
Now, I don’t really know what Jobs would actually do. But interestingly, when he came back to Apple he made some great decisions, many of which were actually very “startup like”. I was working at Apple in the early 90′s and can attest to the fact that the place was in a world of hurt. ”Rumor” had it that at one point Apple was teetering on bankruptcy as well so the comparisons to GM are reasonable if not at least instructive.
To start, the Apple turn around is an amazing success story and Steve Jobs did a few startup things to get Apple back on track. They include:
- Focusing on people
- Leveraging Apple’s strengths
- “Keeping it simple, stupid” aka KISS
- Made a few key bets
Focusing on People
Soon after Jobs returned, he started rebuilding the team with some great Apple Alumni and also lots of new people. And he invested in keeping some of the great talent already there. By the way, he also got rid of lots of the non or under performers. Here are a couple of examples on the executive team.
Jonathan Ive joined Apple in the early 90′s. I had the pleasure of working with him on a few projects including one code named “Lindy” which became the Newton MessagePad 110. He (and others that get less limelight) are incredibly talented designers and deserve credit for giving Apple the distinctive look and feel of todays products -- iMac, ipod, iPhone, you name it. He is an example of retaining an incredibly talented person who has truly delivered in Apple’s turn around.
Steve also recruited new people that filled gaps and holes in the team. Some were alumni from Apple, such as Phil Schiller, and others were new such as Timothy Cook, now Apple’s Chief Operating Officer. Cook brought years of manufacturing and operating experience from IBM and Compaq’s hardware business. This is something that Apple desperately needed in order to re-invent its supply chain for the 21st century. There is a great article about Cook in Fortune if you are interested in learning more. Fortune is suggesting that he is the likely internal candidate to become the next CEO of Apple… But replacing founders and CEOs is a topic for a future post.
So if Steve Jobs were CEO, my guess is that he would first focus on people and figure out who is great and should be retained and who should be brought in, either GM alumni or other folks, to fill in needs and gaps. This includes who should be replaced within the existing leadership team. And he would push this process deep into the organization to go beyond the executive team and focus on the whole company.
Leveraging its Strengths
When Jobs became at first interim CEO and then full time CEO, Apple had its share of challenges and lacked many of the strengths it has today. It did not have an iPod, or an iPhone and its computers did not have the cache they have today. But Apple did have some strengths and Steve played to them. Interestingly, many of its strengths were what many people thought were its weaknesses. One key strength to start was simply that it was different and its loyal user base was graphic designers and non mainstream PC users. It was not a Windows PC. Apple strengthened then built off of that position. It did this both in advertising and then in its products. Remember its ad campaign, “Think Different”? Read the text of its introductory ad which reaches out to those who challenge the status quo and don’t like rules. This was all about leveraging its strengths in its core customer base.
A key startup trait is don’t try to be all things to all people. Leverage your strengths and dominate one area profitably. This is what Apple did to start. They went back to their roots and leveraged that strength.
If Jobs were CEO of GM, he would do the same thing. Leverage a key strength. Without knowing all the details, my guess is that Jobs would focus on strengths of a few key brands -- Cadillac for high end luxury sedans, GMC for the best trucks you can buy, Chevrolet for mainstream affordable cars and Corvette for sports cars. And then the question is what to do with the rest…
Keeping it simple, stupid (KISS)
One of the other things Jobs did was to simplify and GM needs to do the same thing. When he came back there were lots of Macs with lots of configurations and Apple was still funding Newton which was bleeding money. I promise more detail on Newton later… What he did was focus and keep things simple. Apple simplified its product line by focusing on the high end graphic designer and workstation market and also the education and home market with the launch of the iMac. And it killed Newton and the whole effort to have other companies manufacturing Macintosh clones.
GM needs to do the same thing and cancel or sell off a lot of the stuff that is not making money. Start by killing Buick and Pontiac as they are simply re-labeled cars from other brands. Kill Hummer as it was a nice fad car but not a long term profitable market. Sell off Saab. Shut down or sell off Saturn as allegedly it has never turned a profit even though it has a pretty good brand.
Get back to a core strength and dominating 1 or at best a few key markets. Downsizing will be tough as lots of people have something to say about it (see previous post about GM and the friction in its infrastructure) but if GM does not then it will simply continue on its decline and eventually go completely bankrupt since after the US Government, no one else will step in to help… Now if it did all this, then what would be next?
Make a few key bets
Once Jobs got Apple healthy again, he started making a few key bits though not all at once. They included launching its own direct sales channel -- both apple.com and the Apple stores. This was a big bet because it had relied on others to sell its products and now was going to compete. It then launched the iPod and as it famously delclared, “Hell Froze Over”, and had the iPod support Windows. (GASP!). Apple too had to think differently and by supporting Windows with iTunes, it greatly expanded their market for the iPod. That one decision not only made the iPod a success but got many people that had never purchased an Apple product to consider a Mac and has driven sales of the Mac too.
If Jobs were CEO of GM, after making sure it had the right people, leveraging its strengths, keeping things simple, he would likely bet on just a few things -- a break through new product such as the Chevy Volt and maybe a new distribution channel.
The Chevy Volt is an attempt to make an electric car that works with today’s electric and gas infrastructure and is affordable. You can read more about the Chevy Volt here. It has the potential to be the kind of breakthrough product GM needs.
With respect to sales and distribution, isn’t it about time that I can go online, configure the car I want, give my credit card for a deposit and have the price be $1000 over their manufacturing costs, and then have the car delivered to my garage?
And of course, I am sure if Steve Jobs was CEO of GM, the cars would have amazing industrial design and be a delight to both drive and simply admire. GM could use some pizzazz too.
I don’t know if this is what Steve would actually do, or if it would even work, but it is fun to dream. Isn’t it about time that GM started to think different? Very differently? Let me know what you think…
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What if GM was a startup?
Over the past few weeks, a lot has been written about the auto industry and what they should do. As I read everyone’s advice, I keep asking,
“What would GM do if it was a startup?”
To start with, how would I explain the problem to the Board of Directors? The issue seems, well, pretty simple:
1. They are making cars that fewer people want to buy.
2. They are not making money on the ones people do buy.
Call me a simpleton, but that’s it. It is true the problems are exacerbated by a tough economy but has anyone heard that Toyota is teetering on failure? Honda? BMW? Mercedes? Even Hyundai? And another American car company, Ford, is opting out of any government assistance program. Toyota is as big (if not bigger) and they figured out how to profitably make cars people want. And even though all their sales have slumped and they are struggling, they were healthy to start and GM was not. This is not world wide auto industry problem but a company problem here in the US.
So what would GM do if it were a startup?
First, a startup would try to sell itself. GM has a market cap of $2.5 billion. For comparison, Toyota is at $106 billion. GM has approximately 25% market share and Toyota is approximately the same. If Toyota would not acquire them to increase their market share 100% at a cost of 3% of Toyota’s value, it highlights that there is a real problem here. But an acquisition is not going to happen because it is such a mess.
So as a startup, you have to make it work as a standalone company. And as a startup, GM would need to make more of the cars people want to buy and stop making the cars they don’t want. And also stop making cars that don’t make any money.
I know, I know, you are saying “very insightful”. Yet the fact is that GM has not made the tough or right calls – for years. Yes, parts of GM have improved. Cadillac is actually a good luxury car group. But they have effectively ignored the realities of the market and their situation. They don’t sell enough good cars at a profit.
Why? Well, for two big reasons that I can see. The first is a failure of leadership and the second is too much “friction” in the system created by the government and unions that get in the way of needed cost cutting and fixing the problems.
The leadership problem was exemplified in the CEO’s flying to Washington DC asking for a bailout in their corporate jets. Last time I checked, most startup CEOs fly coach. On Expedia and there is a roundtrip flight from Detroit to DC (non stop by the way) for $209 including taxes and fees. Private jet? $20,000. Let’s see, a savings of $19,791. One flight and that’s the profit on 10 or maybe 20 cars?
While no longer flying private jets does not on its own make them profitable but its a start and its an example of bad judgment. If such an obvious cost saver is blatantly ignored until one is embarrassed in the media, then it seems pretty obvious that the leadership team is not going to find nor make the more difficult decisions on how to cut costs and make quality cars. By the way, if a startup CEO flew a private jet other than during an IPO road show, they would be fired in a heartbeat. In summary, first step, let’s get some new leadership. As the saying goes, “It starts at the top.”
What about the government and unions? (I am an equal opportunity layer of blame on this one.)
Most startups would not likely have to deal with the government or unions. If GM were a startup, they would have demanded that the government and unions both need to get out of the way and stop causing “friction” against what is needed to make GM a profitable company.
Let’s start with one example of government friction. Both the federal and state governments have enacted a set of laws that make it prohibitively expensive to terminate a car dealership/franchise. The fact is that GM does not need thousand of dealers anymore. Could you imagine if a startup could not close an underperforming website or let go of an underperforming sales person because state laws protected the advertisers or that employee? That’s pretty much what’s happening in its simplest form with the car dealers. It cost about $1 Billion (yes, billion) for GM to close the Oldsmobile dealerships a few years ago. That’s friction.
I did a quick Google search and found eBay sells a car a minute and has sold about $20 billion in cars in its first few years since offering its auto site. That’s frictionless.
It’s about time we let GM sell cars the best way they can and get government out of the business of being an impediment to its success.
Last but not least, the unions too are part of the problem. No matter what we do, clearly this process will be very painful both for the overall economy and the many people employed in the auto industry. My heart goes out to people that have been working hard at the car companies and the companies in their supply chains. But we cannot inhibit the companies from making the necessary decisions about the compensation for its workforce – which is what unions are doing.
It is truly amazing that today the union presidents want to risk all its employees futures by not making wage concessions right now. It seems like the choice is accept lower wages or not have any wages left for anyone. Isn’t GM about to go bankrupt in 2008 or early 2009? A lot of good it will do to wait to make wage concessions until 2011 when their current contracts expire when GM itself could completely expire in 2009. I wonder if we let the union members vote for either lower wages or bankruptcy which they would choose?
A startup would immediately start over and offer to re-hire employees with new compensation that allow for profitable car sales. A startup would even pay less than market rates and also offer some stock options and equity in the company to participate in any long-term stock appreciation.
By the way, there is a place the government does need to help. It needs to invest in a massive job-training program to help the workers of all skills that lose their jobs find other jobs and careers. And the biggie is to also help deal with the pension and retirement obligations for the retirees. No small feat but this will truly help GM get out of this mess.
The auto industry is important in that lots of people work there but we need a profitable auto industry to survive. Subsidizing the auto industry (or worse nationalizing it) will cost more in the long run than taking the painful but necessary steps today by leadership, the government and unions.
This is a time for GM to stop and re-architect themselves for the 21st century. They should start from the bottom up and figure out how to do less in order to start making money. The government should allow the companies to close unprofitable parts of its business without additional expenses and the union needs to get out of the way in order to help protect the workers that will remain or risk having no one at all.
People have said that the car companies are too big to fail. Maybe they are too big to succeed?
UPDATE: April 27, 2009: NY Times today “Faster Cuts and More Loans Are Key to G.M. Survival Plan” http://bitly.com/pOdT5. It seems that is a all a bit obvious. Though what is really scary is that The US Government will become the majority shareholder of General Motors. Welcome to the new GM – Government Motors. Does anyone else think its a bad idea for the government to own a failing car company? Also, here’s another post on GM titled “What would Steve Jobs do as GM?“ Please feel free to share this with others if you think its interesting using the buttons below. And if you don’t like it, share it with people you don’t like just to bug ‘em…
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